Question

Klaudia Galus D. Increase by $190,000 Question 8 Not yet answered Lowwater Sailmakers manufactur Ponts out of 1 00 currently p P Flag question Sale price per unit $150 Table 8.1 res sails for sailboats. The company has the capacity to produce 25,000 sails per year but is currently producing and selling 20,000 sails per year. The following information relates to current production: Variable costs per unit: Manufacturing $55 Marketing and administrative $25 Total fixed costs: Manufacturing $640,000 Marketing and administrative $280,000 Refer to Table 8.1. If a special sales order is accepted for 3,000 sails at a price of $75 per unit, fixed costs remain unchanged, and asumme there are no variable marketing and administrative costs for this order, how would operating income be affected? Assume regular sales are not affected by the special order Select one O A. Decrease by $5,000 O B. Increase by $35,000 O C. Increase by $60,000 OD. Decrease by $36,000 Question 9 Table 8.1 1:28

Answer 1

Change in operating income = (Special order price - avoidable Variable costs) * 3,000 units

= [75-55]*3000

= 20*3000

= 60,000 increase

Option C is the answer